Abstract
Rice is a staple food in the West African nation of Sierra Leone with little difference in consumption between poor and wealthy households. Rice production is also an important source of livelihood with half of all households, three-quarters of rural households and about two-thirds of poor households grow rice. The final price of rice in the domestic market is an important policy issue. The policy challenge is complicated by the fact that poor households, which earn the bulk of their income from rice production, also purchase rice when own production is inadequate. Under the broad assumption that money income is a reasonable measure of well-being, this paper develops a simple model of the Sierra Leone rice sector and applies procedures to determine key outcomes in terms of domestic production, imports, and exports under conditions that maximize consumer’s and producer’s surplus. The paper finds that the rice sector is operating at a suboptimal level. In addition, simulations suggest that an optimal policy path to balance consumer and producer welfare and meet the higher societal objective of creating jobs requires a moderate level of tariff on imported rice, combined with structural policies to improve the productivity of the sector.
Highlights
Introduction and BackgroundSierra Leone is one of the poorest countries in Africa with 7.6 million people and a GDP per capita of US$439 (World Bank, 2018)
Despite its substantial natural resources, more than half of Sierra Leone’s population is poor and more than three-quarters of the poor live in rural areas and most are engaged in agriculture
The primary purpose of the rice sector model is to simulate the effects of policy interventions, most notably the impact of the removal of the ECOWAS tariff waiver
Summary
Sierra Leone is one of the poorest countries in Africa with 7.6 million people and a GDP per capita of US$439 (World Bank, 2018). The traditional rice value chain involves mostly smallholders who supply relatively poor-quality rice (with over 35 percent broken grains) to both rural and urban consumers, but only a small proportion reaches Freetown. We assume that money income is a reasonable measure of well-being, and we develop a simple model of the Sierra Leone rice sector and apply procedures to determine key outcomes in terms of domestic production, imports and exports under conditions that maximize consumer’s and producer’s surplus which lead to the most efficient social outcome. The remainder of the paper is organized as follows: Section II provides a brief overview of the theoretical framework on demand and supply and the concepts of consumer’s and producer’s surplus as a measure of welfare for the consumer and the producer, respectively. As prices rise and producer’s surplus is increased, the welfare of producers is improved, but the welfare of consumers is diminished
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